GOP Makes Counteroffer In Cliff Talks

House Republicans made a new deficit proposal to the White House that calls for $800 billion in tax increases. Jerry Seib reports on The News Hub. Photo: Getty Images.

By

Janet Hook,

Carol E. Lee and

Damian Paletta

Updated Dec. 4, 2012 4:35 a.m. ET

House Republicans on Monday made a fresh deficit-reduction proposal to the White House that calls for $800 billion in increased tax revenue, half of what President Barack Obama has proposed.

The GOP offer was immediately rejected by the White House, but it provides the most detailed statement to date of what Republicans are willing to concede for now. It comes days after the White House put forward its opening bid in the high-stakes deficit talks. With both sides now having made preliminary offers, the parameters for future negotiations between Republicans and the White House are becoming clearer.

The Fiscal Cliff

Monday's proposal would make $600 billion in cuts in Medicare and other health programs over 10 years, compared with the $350 billion the president proposed. It would also slow the growth of Social Security benefits, a move most Democrats oppose. The tax-revenue figure is one Republicans say could be achieved without increasing income-tax rates, one of their core objectives.

"What we are putting forth is a credible plan that deserves serious consideration by the White House," said House Speaker John Boehner (R., Ohio), in a briefing for reporters.

The proposal was made in a letter sent to the White House and signed by Mr. Boehner and other GOP leaders, notably including House Budget Committee Chairman Paul Ryan (R., Wis.), who has been an opponent of any tax increase both in Congress and as Mitt Romney's vice-presidential running mate. His support will be vital to any final deal.

The offer's outlines are similar to a budget deal that was emerging in private talks between Mr. Obama and Mr. Boehner in mid-2011, when Mr. Boehner agreed to $800 billion in new revenues but Mr. Obama sought more. Those talks collapsed with each side blaming the other for the breakdown.

The immediate Democratic reaction was dismissive. White House communications director Dan Pfeiffer said the plan "includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve."

He stuck with the president's insistence that the GOP agree to raising tax rates on upper-income Americans.

Administration officials were surprised by the GOP offer. They played down its potential to advance talks, saying Mr. Obama continues to wait for Republican leaders to soften on higher tax rates.

Still, officials said, congressional leaders and the president could meet by the end of this week. Their last meeting was nearly three weeks ago. Discussions between congressional and White House staff continued over the weekend, officials said.

ENLARGE

House Speaker John Boehner calls the new proposal 'a credible plan that deserves serious consideration by the White House.'
Getty Images

On Capitol Hill, congressional Democrats made clear they would not be satisfied until the GOP gave ground on raising upper-income tax rates.

Rep. Sander Levin (D., Mich.), ranking Democrat on the House Ways and Means Committee, said Republicans were in "a state of denial" if they believed they did not have to concede on tax rates.

"The recent election was not a status quo election, but rather a validation of the president's often-stated position on taxes," said Mr. Levin.

Beyond the question of what to do with the top tax rates, another likely sticking point for Democrats in the GOP proposal would be how it treats Social Security. Republicans want to change the way cost-of-living increases are calculated, a shift that would save money by slowing the growth of benefits without fundamentally altering the structure of the program. Many Democrats want to exclude the program from the deficit discussion, because they don't think it contributes to the nation's deficit problem.

Despite the public bantering, typical of a negotiation with weeks to run, the proposal represented modest movement in the face of a deadlock between the parties on how to avoid the fiscal cliff, the $500 billion in tax increases and spending cuts due to take effect in January.

The White House last week irked Republicans by making an opening bid in the budget talks that largely summarized the president's most-recent budget proposal, one that was heavy on tax increases and light on spending cuts.

Republicans said they were tempted to respond by offering their own most uncompromising proposal—the House-passed budget from Rep. Ryan that called for a far-reaching overhaul of Medicare and no tax increases.

Instead, they drew on a proposal from Erskine Bowles, a Democrat who has been pushing for bipartisan deficit-reduction plans. The proposal was narrower than that recommended by the president's 2010 deficit-reduction commission, known as Simpson-Bowles.

Mr. Bowles distanced himself on Monday from the GOP proposal, which had been drawn from his testimony before Congress's 2011 deficit-reduction "supercommittee," noting he had simply taken "the midpoint of the public offers put forward during the negotiations to demonstrate where I thought a deal could be reached at that time," Mr. Bowles said in a written statement on Monday.

In their counteroffer, Republicans did not accept Mr. Obama's bottom-line demand that income-tax rates increase for the top two income brackets. GOP aides describing the plan said they believed the proposed $800 billion revenue target could be met without raising rates, but by closing loopholes and deductions in a broad rewrite of the tax code.

The proposal represented a series of targets without much policy detail on how they would be met, such as the specific loopholes and deductions Republicans would get rid of.

Asked if the plan called for an increase in the eligibility age for Medicare, the GOP aides didn't answer directly, but one said, "I don't think there is any way to get a comprehensive deal without it."

The proposal did not say how the plan would fit into the two-step legislative process that leaders of both parties have tentatively embraced. That would include a small deficit-reduction package crafted and passed by year's end, setting the stage for a broader effort next year to revamp the tax code and curb Medicare and other entitlement spending.

The proposal also did not specify how Congress would address the $110 billion in spending cuts set to take effect Jan. 2 in defense and discretionary spending. The GOP aide suggested the plan's savings would be enough to allow the "sequester" to be postponed or replaced.

In a signal of the political pressures facing Mr. Boehner as he seeks compromise with the president, he came under fire Monday from some conservatives for an offer they said conceded too much.

"Speaker Boehner's counteroffer today offers disappointingly small spending reductions," said James Valvo, policy director of Americans for Prosperity, a conservative political group.

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